Travel and Talks

I’ll be in the following cities to give some talks, come say hello!

Atlanta, Wed September 10th, ASFIP

Chicago, Sep 15th-19th, State Street and Morningstar Events

Charlotte, Sat Sep 20th, CFA/MTA Luncheon

Asia (Thailand and Bhutan), October 1-14

Sante Fe, Oct 16th-17th, private event

Portland, November 15th, AAII

Houston, January 15th, FPA, January 26th-28th

Everything You Need To Know About the CAPE Ratio

I just got back from 5 days backpacking and fishing in King’s Canyon (next to Sequoia) at a place called Rae Lakes.  It has been on my bucket list for years, and it did not disapoint.  Here is a quick photo before we dive into all things valuation related.  Lots and lots of (little) trout.

 photo (5)


So, there has been a lot of discussion about the CAPE ratio on social media lately.  I’ve been writing on CAPE for a long time, including dozens of blog posts, a white paper, and a book - Global Value.  (I’ll even send you a free copy if you agree to write an honest review on Amazon, just email me.)  We launched an ETF on the findings at has been one of the top 5 launches of the year.  Barry did a nice post with links to a lot of writers thoughts on the topic.  I’ll add some of my findings with links below from the blog over the years.  

Is the CAPE ratio good at predicting future returns? (Yes) Is it perfect? (N0)

Does the CAPE ratio work on individual stocks? (Yes)

Does the CAPE ratio work for sector rotation? (Yes)

Does valuation and sentiment correlate? (Yes)

Using CAPE to get out of stocks in the 1990s, is that a bad thing? (No)

Do accounting changes matter (Not really)

Does 2008/2009 matter? (No)

Does it matter what CAPE ratio you use? ie 1,3,5,7, 10 year? (Not really)

Can you combine trend and valuation to time the stock market? (Yes)

Does buying expensive markets result in bigger losses? (Yes)

Do the best and worst times in history to invest correlate with value? (Yes)

Another post on trend and value

Behavioral reasons value works



and Global Valuations


Does CAPD work too? (Yes)

Does CAPD say the same thing as CAPE? (Yes)

CAPE ratio Bollinger Bands

Are market cap weighted bubbles one reason the CAPE ratio works? (Yes)

Did the CAPE ratio work in 2013? (Yes)

How long does it take to work off a CAPE ratio bubble? (About 2-4 years)

Does it matter what value metric you use? (Not really) also here

How big was the US bubble? (Normal for bubbles, tiny vs. Japan)

Are most stock markets cheap? (Yes)

Does adjusting CAPE ratio for inflation make sense? (Perhaps)

Does CAPE simply correlate with drawdowns? (Yes) and here

Asness on CAPE

Arnott on CAPE

Business Radio Podcast

I can’t rec these interviews enough.  Barry Ritholtz chats up lots of investment luminaries including Gundlach, Arnott, etc….bookmark!

The Most Interesting Chart of 2014 (So far)

Read, and then re-read this study.  Patrick and I chatted about this study when I was in NYC last over beers and wine…my guess was that the moonshots would have had more growth characteristics, which caused people to consistently chase them.  Turns out, it looks almost random.


Screen Shot 2014-08-05 at 10.30.37 AM

Cambria Raising a Crowdfund Round

I have been following the crowdfunding space with interest over the past few years, and dabbled a bit investing in a few private companies.  As our investment management company has grown to over $400 million in assets under management, we have considered building out the business to add some much needed operational support.  While at this time we are profitable and don’t need to raise money to continue our current operations, additional capital would allow us to accelerate a few initiatives and add some headcount to our current team of four.

Crowdfunding a round with accredited investors who can add value seems like an interesting option.  We have reviewed a number of the crowdfunding websites, but they all charge fees that we find to be too high for a company that has a public brand and can go straight to the consumer. We don’t want to penalize our investors with carry or any other fees, so we are organizing the round ourselves with no fees.  The round will be small (~$2M).

If you are an accredited investor that is interested in investing in a private, fast growing, early stage ETF issuer, please drop us a line at with “Crowdfund” in the subject line and we will send you the pitch deck.


Legal Disclaimer

Please note that any securities would be sold only to accredited investors, which for natural persons, are investors who meet certain minimum annual income or net worth thresholds.  Further, investing in securities involves risks, and investors should be able to bear the loss of their investment.

Any securities offered by the company would (i) be offered in reliance on an exemption from the registration requirements of the Securities Act and (ii) not be subject to the protections of the Investment Company Act or required to comply with specific disclosure requirements that apply to registration under the Securities Act.  The SEC will not have passed upon the merits of or given its approval to such securities, the terms of such offering, or the accuracy or completeness of any offering materials.

Any performance data included herein represents past performance, which does not guarantee future results, and current performance may be lower or higher than the performance data presented.  We are not required by law to follow any standard methodology when calculating and representing performance data and the performance of our company may not be directly comparable to the performance of other companies. 

Top July Tweets

Does the Government Owe You Money?

I do this post every year around tax time, and somehow forgot this year.  But, when I saw this New York Times article I thought I would send out a reminder.  I used to say this would be a great way to get a job at a hedge fund (show up and have printed out how much the gov owes all the partners…)

So far our readers have claimed over $20,000 in cash with one reader finding $10k!  Email me if you find anything…


My Readers are Cheap Bastards

…and I consider that a compliment – love the value investors out there!

I have done lots of posts on self-publishing, here is a good one from James recently on publishing 3.0.  Below is the distribution of books sold/free from my last two books combined.  

Book #4 hopefully out this fall…



Upcoming Speeches

I should have posted this sooner, but local LA folks can swing by two speeches.  Today (sorry!) in West LA, then in a few weeks downtown (though $) on August 23rd.  You’re supposed to RSVP for the first one but if you show up early should be fine.  

Or, you could just go watch my Google speech here but that has downside of not getting to have any beers with the speaker!


3:30pm – 7:00pm



Westwood Gateway Conference Center

11111 Santa Monica Blvd.

Suite 210

Los Angeles, CA  90025

Parking: There is quite a bit of free or metered street parking; garage parking is also available for a fee.

Contact Number: (626) 676-0655




3:30-4:15:            Networking and Beverages


4:15-6:30:            “A Systematic Approach to Country Allocation for Equities”, (document attached)

Mr. Ruben Falk – Senior Director, Global Investment Management Product Segment, S&P Capital IQ.


“Profiting from Bubbles and Hacking the Hedge Funds”,

Mr. Mebane Faber – Chief Investment Officer, Cambria Investment Management


6:30-7:00:            Discussion and Beverages



Teaching Your Children How to Invest

I had a reader email in the other day with a seemingly simple question:  what is the best way to teach your child to invest?  This got me to thinking quite a bit while walking > 100 holes of golf this weekend (note: I’m not a golfer, but I do like hanging outdoors with friends, having beers, and my god is Bandon and coastal Oregon beautiful. Result – buying my first bag of clubs soon!)  What is the best way to teach someone to invest?

My reader asked for input on this scenario, paraphrased:  

I thought about giving my son, who is headed to college, $10,000 to invest.  At the end of college, he could keep any gains, but would not be responsible if he lost the initial capital.  Thoughts?

Hopefully this would teach your son to be involved and interested in markets.  More than likely it would teach him how to take as much risk with OPM (other people’s money), since he has unlimited upside and no downside.  

If he makes money?  Lesson learned is that he is brilliant, and it is easy to beat the market.  This could lead to overconfidence and bigger losses going forward.  

If he loses some or all of the money, lesson learned is that markets are hard, likely he lost interest and/or started trading options, penny stocks,  futures, or FX, and the real benefit of losing your own money (real physical pain) is mostly lost since the money wasn’t his to start with.  Possibly the main result would be a strained relationship due to the  embarrassment of losing his father’s money.

So, if this process isn’t ideal, what is?  Well, I got to thinking about another idea.  What if instead of letting your child run wild with the money without any guide, you gave him a different project.  Some broad outline below, and I’m looking for feedback on the process, as well as the recommended reads to expand into a white paper or book, so shoot me an email!

1.  Each semester his/her job is to read one book, explain in one page or less the findings, what it teaches, and summarize how to implement the process of the book in the real world.

3.  You contribute $X to his IRA, brokerage account etc.  The child implements the process of the book, and you review statements and chat over the updates at each sit down meeting (2x a year? 4x?)

The big pros of this process is that it teaches the child the process of investing rather than simply focusing on the dollar figure, which after four years will almost be entirely due to luck and the market environment (but more likely overtrading, fees, etc).  Before I reveal my 5-10 books, let me hear yours.  

As an example, The Little Book that Beats the Market would show the investor the benefit of investing in a simple, objective process for picking stocks, the benefits of a 12 month holding period for taxes, removing emotions, etc….whereas a book like the Ivy Portfolio would show the benefits of a global focus, broad asset allocation, but also how a totally different approach like how trendfollowing works….

What books or reads would you suggest?



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